Bangkok--12 Aug--Standard & Poor's
Standard & Poor's Global Fixed Income Research has published it latest Stress In Corporate America report, in which we use three of our research publications--weakest links, potential bond downgrades, and the distressed report--to identify and spotlight U.S. sectors we believe are currently subject to the highest levels of credit stress.
"In light of sluggish consumer demand and some uncertainty about economic and credit market conditions, the media and entertainment, oil and gas, and high technology sectors were, in our opinion, the most troubled sectors as of Aug. 5, 2011," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research. These sectors had the highest levels of risk among our lists of distressed companies (speculative-grade companies with securities trading in excess of 1,000 basis points, or bps, above U.S. Treasuries), weakest links (companies rated 'B-' or lower with negative outlooks or ratings on CreditWatch with negative implications), and potential bond downgrades (investment-grade or speculative-grade companies with negative outlooks or ratings on CreditWatch negative).
We identified 89 companies in these three sectors that meet at least one of the criteria described above, said the article, titled "Stress In Corporate America: Some Positive Developments For The Three Most Stressed Sectors, But Borrowing Costs Could Rise In The Near Term."
Of the 89 companies in these three sectors (media and entertainment, oil and gas, and high technology), 22 are on more than one list, indicating even higher vulnerability.
"Borrowing costs in these three sectors vary somewhat, but they have been converging in recent months because bond spreads have risen since May," said Ms. Vazza. "The media and entertainment sector still faces higher borrowing costs. The sector's speculative-grade corporate bond spread was 76 bps above high yield as of Aug. 9, 2011, and its distress ratio is 13.9%. Likewise, the spread for the high technology sector is increasing, coming in at 141 bps above high yield." The distress ratio for this sector is 11.1% in July, up from 7.4% a month earlier.
"Companies in the oil and gas sector are faring better," said Ms. Vazza. "The sector's spread is 58 bps below speculative grade, and it has a distress ratio of 6.9%--a bit higher than the overall level of 6.1% as of July 15, 2011, but considerably lower than those of the other two stressed sectors."
The report is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to
[email protected]. Ratings information can also be found on Standard & Poor's public Web site by using the Ratings search box located in the left column at www.standardandpoors.com. Members of the media may request a copy of this report by contacting the media representative provided.
Media Contact:
Mimi Barker, New York (1) 212-438-5054,
[email protected]
Analyst Contacts:
Diane Vazza, New York (1) 212-438-2760